Spotify Technology S.A. (NYSE: SPOT) stock rose on Tuesday after the company reported fourth-quarter 2025 results that exceeded Wall Street expectations. Spotify posted quarterly earnings of $5.16 per share, surpassing the analyst consensus estimate of a $2.95 profit.
Revenue reached $5.28 billion (4.53 billion euros), up 7% year-over-year and ahead of projections of $5.16 billion.
This growth was largely driven by the success of the company's "Wrapped" campaign, which encouraged users to share their most-streamed artists and songs on social media, as well as the global launch of an enhanced free tier, Bloomberg reported on Tuesday.
User Growth Accelerates
The quarter showed strong user growth. Monthly active users (MAUs) rose by 11% Y/Y to 751 million, adding a record 38 million subscribers in the last quarter, outperforming company expectations by 6 million.
Premium subscribers climbed 10% Y/Y to 290 million, tracking in line with forecasts and showing broad-based regional gains.
Despite this momentum, monetization trends softened.
Average revenue per user (ARPU) for Premium slipped ~3% Y/Y to 4.70 euros, while ad-supported revenue declined 4%.
Margins Mixed as Premium ARPU Slides
Spotify delivered an 83-basis-point improvement in gross margin to 33.1%, supported by gains in the Premium and Ad-supported segment.
Premium gross margin of 34.8% rose 10 basis points from a year ago. The trend was driven by revenue growth outpacing music costs net of marketplace programs and audiobooks costs, largely offset by video podcast costs.
Ad-supported gross margin rose 441 basis points to 19.5%, helped by more substantial contributions from podcasts and music.
Operating income increased 47% year over year to 701 million euros, translating to a 15.5% operating margin.
Spotify ended the quarter with 9.5 billion euros in cash, cash equivalents, restricted cash, and short-term investments, and generated 834 million euros in free cash flow during the period.
The company reported 7,323 full-time employees at the end of the quarter.
Outlook
For the first quarter of 2026, Spotify expects revenue of 4.50 billion euros, versus the analyst consensus forecast of 4.57 billion euros.
The company expects total Premium subscribers to reach 293 million, implying roughly 3 million net new subscribers during the quarter.
Total monthly active users (MAUs) are projected to climb to 759 million, reflecting approximately 8 million net new additions.
The earnings beat marks an early win for new co-CEOs Gustav Söderström and Alex Norström, who took over at the start of the year from co-founder Daniel Ek.
Last month, the company also announced price increases for users in the U.S., bringing the cost of a single subscription up by a dollar to $13 a month, according to Bloomberg.
SPOT Price Action: Spotify Technology shares were up 13.54% at $471 during premarket trading on Tuesday, according to Benzinga Pro data.